CHAPTER THREE

3. PROJECT IDENTIFICATION
 Project identification is the findings of project that could contribute towards
achieving specific development objectives.
 It is the initial phase of the project development cycle.
 a process to assess each project idea and select the project with the highest
priority.
 The term "Project Idea" refers to a concept or proposal for a potential project.
 The main purpose of a project idea is to identify a problem, need, or
opportunity that can be addressed through a project.
 It involves identifying the projects/solutions for a particular problem based on
various factors.
 It provides a broad vision of what the project aims to achieve and guides the
subsequent project planning and execution processes.
 A well-defined project idea helps stakeholders, such as project sponsors,
managers, and team members, understand the purpose and potential benefits of
the project.
Pre-Identification
 It is an important prelude to project identification.
 This pre-identification stage involves surveying, reviewing, inventorying, and
analysis of:
 Strategies and policies
 Natural resources data, and
 Socio-economic information.
 While a good data base is a prerequisite to sound project formulation.
 While the analysis of data will identify gaps and throw up ideas for possible
projects,
 Project identification must be carried out also with in a frame-work of national,
regional, and sector development (including pricing, taxation, and subsidy)
policies
There are four key phases of project identification. These are:
 Actual Project Identification- The generation of project ideas by formal
and informal institutions and individuals.

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  Description of Project Idea- An actual written description of the project
idea or concept, summarizing the main elements of the proposed project to
use in the screening, ranking and prioritization of project ideas.
 Screening- An initial review of project ideas and concepts to see if they
should be advanced or abandoned at an early stage.
 Prioritization- The ranking and selection of projects against a set of criteria
to identify the “best” projects to move actively into the designed stage and
development.

Sources of Project Ideas

 In general, most projects start as an elementary idea.
 Eventually, some simple ideas are elaborated into a form to which the title
“project” can formally be applied.
 Good project ideas are the key to success. Therefore a wide variety of sources
should be tapped to analyze them.
 To have a wide range of options, the sources of project ideas can be categorized
into two they are: micro level sources and macro level sources
Macro level sources
• Refers to the source of project idea, which is reflected from national,
regional and sectorial level sources.

Such as:
• Policies: National policies, strategies & priorities as may be enunciated by
government from time to time;
• Plans and Strategies: National, sectorial, sub-sectorial or regional plans and
strategies supplemented by special studies
• Studies and publications: General surveys, resource potential surveys,
regional studies, master plan and statistical publications, which indicate
directly or indirectly investment opportunities.
• Constraints in the development process: Constraints on the development
process due to shortage of essential infrastructure facilities, problems in the
balances of payments, etc.
• Government decision to correct social and regional inequalities or to satisfy
basic needs of the people through development projects.

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 • A possible external threat that necessitates projects aiming at achieving,
for example, self-sufficiency in basic materials, energy, transportation, etc.
• Unusual events such as droughts, floods, earthquakes, hostilities, etc.
• Lack of foreign exchange (trade deficit) requires export oriented projects or
import substitution oriented projects
• Multilateral or bilateral development agencies,
• Regional or international agreements in which a country participates, etc

Micro level sources

• refers to the source of project idea, which is reflected from community or
individual level sources
Such as:
• Identification of unsatisfied demand at community level. Example ;
Drinking water problems require water supply projects
• Existence of unused or underutilized natural or human resources. Example;
using various rivers for irrigation purpose.
• Some may be “resource based” and stem from the opportunity to make
profitable use of available resources.
• Some projects may be “market based” arising from an identified demand in
home or overseas markets.
• Others may be “need-based” where the purpose is to try to make available to
all people in an area of minimal amounts of certain basic material
requirements and services.
• Well – informed technical specialists and local leaders are also common
sources of projects. Technical specialists will have identified many areas
where they feel new investment might be profitable, while local leaders may
have suggestion about where investment might be carried out.
• Ideas for new projects also come from proposals to extend existing
programs.

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During identification, the analyst should eliminate project proposals
that:
 Are technically unsound and risky
 Have no market for the output
 Have inadequate supply of inputs
 Are very costly in relation to benefits
 Assume over ambitious sales and profitability, etc.
 As a result, some of the project alternatives will be rejected and those
the are promising will be advanced to the next stage called project
preparation.
Who Identifies Projects?
There are quite large number of institutions and/or groups that often identify
investment opportunities (or generate project ideas) in the society. These entities
may be private firms, public enterprises, government units, local or international
development agencies, financial institutions, as well as profit seeking or not-for-
profit organizations. Listed below are the major groups that are involved, by and
large, in the identification of projects in the society:
1 Technical specialists
Technical specialists can initiate project ideas from their experiences of through
their research findings. This usually is common in manufacturing firms where
mechanical and industrial engineers working there generate new expansion and/or
new industrial projects. These projects usually either improve the products being
produced currently or produce new products.
2 Local leaders
Social and community projects could emanate from the suggestions made by local
leaders regarding the problems prevailing in the area. Local leaders could also
initiate project ideas from already identified or implemented projects. For instance,
project ideas on irrigation could be initiated from an already constructed hydro-
electric dam.
3. Entrepreneurs
Entrepreneurship includes the characteristics of perception of managerial
competence and motivation to achieve results. These characteristics make
entrepreneurs the major sources of industrial and commercial projects

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4. Governments
Government guidelines such as national development plans that spell out what the
government is likely to do to achieve its targets in different sectors of the economy
are the sources of many projects by the government and entrepreneurs.
5. Others
In addition to the above list down economic units the following agents are also
becomes source of project ideas:
 Small producers’ organizations
 Large scale individual private sector producers
 Product marketing organizations
 Private sector companies (Local and Foreign)
 State owned enterprises and organizations
 Government ministries
 Development banks
 Other aid agencies
 Local government
 Local politicians and pressure groups, etc.
 Private sector, co-operative and parasternal corporate plans
 Investment identification missions by development and other aid donors, etc.
Project Concepts and Profiles
Project Concepts
 A project concept is a high-level idea or overview of a proposed project. It
outlines the vision, purpose, and key elements to provide clarity about what the
project aims to achieve and why it's needed.
Key Features:
 Purpose: To pitch or explore an idea and its feasibility.
 Content:
 Problem/Opportunity Statement
 Goals and Objectives
 Target Audience or Beneficiaries
 Preliminary Scope
 Potential Impact or Outcomes
 Detail Level: Brief and exploratory, used in the initial stages.

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 Example:
 "Developing a mobile app to connect small-scale farmers to local markets,
improving income and reducing food waste."
Project Profile
 A project profile is a more detailed summary or description of a specific
project. It serves to document key information about the project for
stakeholders, funders, or team members.
Key Features:
 Purpose: To present detailed, structured information about a project for
implementation, funding, or reporting purposes.
 Content:
 Title and Summary
 Background and Context
 Goals and Objectives
 Activities/Timeline
 Stakeholders/Partners
 Budget
 Outcomes and Indicators
 Detail Level: Comprehensive and `structured.
 Example:
 A 5-page document detailing a funded initiative to train 1,000 farmers, listing
timelines, partners, budget breakdown, and success metrics.
Aspect Project Concept Project Profile
Purpose Explore or propose an idea. Provide a detailed overview for
execution.
Level of Detail Brief, high-level. In-depth, structured, actionable.

When Used Early stages (idea development). Later stages (planning, funding,
reporting).
Audience Internal teams, early-stage Funders, partners, implementers.
stakeholders.
Project Prioritization and Ranking
Project prioritization and ranking is the process of evaluating and selecting projects
based on their importance and order of execution:

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 Purpose
To determine which projects should be given priority and which should be put on
hold
 Goal
To ensure that resources are allocated properly, including time, people, equipment,
and financial resources
 Criteria
 Projects are ranked based on criteria such as:
 Impact on the organization's growth

 Contribution to innovation
 Risk
 Resources
 Cost/benefit ratio
 Potential return on investment (ROI)
 How critical each project is to a department
 How the work impacts business or financial goals
 Staff availability
 Project prioritization should be an ongoing process because variables may
impact the selection criteria as the project progresses.
 Prioritization refers to ranking or scoring projects, based on certain criteria, to
determine the order of execution. However, the terms “prioritization” and
“selection” are often used interchangeably, as the two processes are intertwined.
Preliminary project idea screening
 Preliminary project idea screening is the initial stage of project evaluation that
assesses the potential success and feasibility of a project idea. It involves
analyzing the project's goals, objectives, scope, and resources. The goal is to
identify potential risks, limitations, and challenges that may impact the project's
success.
 Preliminary Project Idea Screening is the process of quickly evaluating and
filtering multiple project ideas to determine their feasibility and potential for
success. This step comes after generating project ideas and helps eliminate

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 ideas that are impractical, unprofitable, or misaligned with business goals. It
ensures that only the most promising ideas move forward for detailed
evaluation and planning.
 Here are some factors to consider when screening a project idea:
 Market potential: Whether the idea has the potential to meet the needs of
the market and customers
 Technical feasibility: Whether the idea is technically feasible
 Affordability: Whether the idea is affordable, including the resources
needed for research and development
 Compatibility: Whether the idea is compatible with promoters, government
priorities, and market availability
 Risk levels: The level of risk associated with the idea

Project Rating Index (PRI)

 The Project Rating Index (PRI) is a systematic and quantitative tool used to
evaluate and rank project ideas or proposals based on multiple weighted
criteria.
 It helps decision-makers objectively assess and prioritize projects by assigning
scores to various factors like feasibility, financial returns, risks, and strategic
alignment.
 The PRI ensures that projects are evaluated consistently, enabling organizations
to make informed choices about which projects to pursue.
 When large numbers of project ideas are generated, we need preliminary
screening to judge whether the project is primarily worthwhile or not. The PRI
streamlines the process of preliminary screening

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Key Components of the Project Rating Index (PRI)

1. Criteria Selection

 Define the key parameters or factors to evaluate projects.

 Common criteria include:

 Financial viability (e.g., ROI, NPV, payback period)

 Strategic alignment with goals
 Technical feasibility
 Risk level
 Market potential
 Resource availability

2. Assigning Weights

 Each criterion is assigned a weight based on its importance or priority.

 Weights are typically expressed as percentages, where the total weight
equals 100%.

3. Scoring Projects

 Projects are scored on each criterion (e.g., a scale of 1 to 5 or 1 to 10).

 A higher score reflects better performance against that criterion.

4. Calculating Weighted Scores

 Multiply each score by the weight of the corresponding criterion to

obtain the weighted score.
 Sum up all weighted scores to calculate the Project Rating Index for
each project.

5. Ranking Projects

 Projects are ranked based on their total PRI scores.

 Projects with the highest scores are considered the most favorable for
selection or implementation.

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Formula for PRI Calculation

PRI Score=∑i=1n(Score of Criterioni×Weight of Criterioni)

Where:

 n= Number of evaluation criteria

 Scores are given based on project performance in each criterion
 Weights represent the relative importance of each criterion

Steps to Develop a Project Rating Index (PRI):

1. Identify Evaluation Criteria

 Choose relevant criteria that align with organizational goals (e.g.,
cost, revenue, risks, benefits, etc.).

2. Assign Weights to Criteria

 Use expert opinions or management priorities to assign weights to
each criterion.
 For example:
 Financial Returns = 40%
 Strategic Fit = 20%
 Risk Level = 20%
 Market Demand = 20%

3. Score Each Project

 Rate each project against the selected criteria on a consistent scale
(e.g., 1 to 10).

4. Calculate Weighted Scores

 Multiply the score of each criterion by its respective weight.

5. Sum the Scores

 Add the weighted scores to get the total PRI score for each project.

6. Rank Projects
 Arrange the projects in descending order of their PRI scores.

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Example of PRI Calculation

Assume you are evaluating three projects (A, B, and C) based on four criteria:

Criteria Weight (%) Project A Project B Project C

Financial Viability 40% 8 6 7

Strategic Fit 20% 7 8 6

Risk Level 20% 6 7 8

Market Potential 20% 9 8 7

Step 1: Multiply Scores by Weights

Criteria Project A (Score × Weight) Project B Project C

Financial Viability 8 × 0.4 = 3.2 6 × 0.4 = 2.4 7 × 0.4 = 2.8

Strategic Fit 7 × 0.2 = 1.4 8 × 0.2 = 1.6 6 × 0.2 = 1.2

Risk Level 6 × 0.2 = 1.2 7 × 0.2 = 1.4 8 × 0.2 = 1.6

Market Potential 9 × 0.2 = 1.8 8 × 0.2 = 1.6 7 × 0.2 = 1.4

Step 2: Calculate Total PRI Score

 Project A: 3.2+1.4+1.2+1.8=7.6
 Project B: 2.4+1.6+1.4+1.6=7.0
 Project C: 2.8+1.2+1.6+1.4=7.0

Step 3: Rank Projects

1. Project A: 7.6 (Highest Priority)

2. Project B: 7.0

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 3. Project C: 7.0

Benefits of PRI

1. Objective Decision-Making: Ensures fair and transparent evaluation of

projects.
2. Prioritization: Helps rank projects based on their overall merit and value.
3. Resource Optimization: Ensures resources are allocated to the most
beneficial projects.
4. Customizable: Criteria and weights can be tailored to align with
organizational goals.
5. Comparative Evaluation: Allows comparison of multiple projects based on
a standardized framework.

The Key Differences Between project Prioritization and Ranking

vs Preliminary Project Idea Screening

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Example Scenario

 Imagine you have 10 project ideas:

1. Preliminary Project Screening:

 You check if the ideas meet basic requirements like feasibility, market
demand, and technical capacity.
 After this stage, you narrow down to 4 feasible ideas.

2. Project Prioritization and Ranking:

 You analyze these 4 ideas in detail using criteria like ROI, risk
assessment, strategic alignment, and urgency.
 You rank the projects based on their scores.
 For example:

 Project A: 1st priority

 Project B: 2nd priority
 Project C: 3rd priority
 Project D: 4th priority

Summary

 Preliminary Screening is about eliminating weak ideas early.

 Prioritization and Ranking is about comparing and ordering the remaining
ideas for execution.

Identification of Commercial Project Ideas

 Identification of Commercial Project Ideas involves finding and evaluating
opportunities for business ventures or entrepreneurial projects that can be
commercially successful. This process requires creativity, research, and
strategic analysis.
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 Commercial project ideas are construction projects that are intended to be
used for commercial purposes, such as offices, retail spaces, warehouses, hotels,
and industrial facilities. Some examples of commercial projects include:
 Malls
 Shopping centers
 Offices
 Factories
 Restaurants
 Cafes
 Department stores
 Private medical practices
 Private theme parks
 Recreation venues
 Commercial projects are designed to generate revenue and require careful
planning. Commercial project management covers the entire process of a
project, from selling to execution, monitoring, and controlling.
 Organizational leaders can cultivate institutional creativity for commercial
project idea generation through (Chandra, 2006):
 Develop an acceptance for change.
 Encourage new ideas.
 Permit more interaction.
 Tolerate failure
 Provide clear objectives and freedom to achieve them
 Offer recognition, Etc.

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